drp 2017 forecast 01 - development research projects/economic and... · scorpions, “wind of...

Winds of Change

Metro Denver2017 Economic ForecastJanuary 2017

© Can Stock Photo Inc. / BettinaBlass

2017 Economic Forecast for Metro Denver

Global Outlook

If one does not know to which port one is sailing, no wind is favorable.

- Lucius Annaeus Seneca (Seneca the Younger)

Courtesy of Portland State University


Mixed Global Growth Prospects

2015 2016 2017World 3.2% 3.1% 3.4%United States 2.6% 1.6% 2.2%

Canada 1.1% 1.2% 1.9%Mexico 2.5% 2.1% 2.3%China 6.9% 6.6% 6.2%Japan 0.5% 0.5% 0.6%European Union 2.3% 1.9% 1.7%United Kingdom 2.2% 1.8% 1.1%

Source: International Monetary Fund, World Economic Outlook, October 2016.

Year over Year Growth in Output


Real U.S. Gross Domestic Product Annual Average Growth Rates

2.7%

1.8%

-0.3%

-2.8%

2.5%

1.6%

2.2%1.7%

2.4% 2.6%

1.7%2.3%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Source: U.S. Bureau of Economic Analysis.2016e = DRP estimate; 2017f = DRP forecast


Consumer Activity

The future's in the air.I can feel it everywhere.Blowing with the wind of change.– Klaus MeineScorpions, “Wind of Change”

© Can Stock Photo Inc. / FotoYou123


Components of Current GDP

-$1,000$0

$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000

$10,000$11,000$12,000$13,000

1929

1932

1935

1938

1941

1944

1947

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

Billio

ns ConsumptionInvestmentNet ExportsGovernment

Source: U.S. Bureau of Economic Analysis.


Metro Denver Annual Change in Population

-5,000

5,000

15,000

25,000

35,000

45,000

55,000

65,000

75,000

2000 2005 2010 2015 2020 2025 2030

2016 Population = 3.13 Million

Net Migration Natural Increase

Source: Colorado Division of Local Government, State Demography Office.


Percentage of In‐Migration by Millennials, ages 18‐34 years

0%

10%

20%

30%

40%

50%

60%

Atlanta Austin Dallas Denver Phoenix Portland Salt Lake City Seattle

Source: U.S. Census Bureau, 2014 American Community Survey.


Millennials largest population group*(*end of Centennials not yet determined)

0

10,000

20,000

30,000

40,000

50,000

60,000

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90+

Metro Denver Population 2016 = 3.13 million

Millennials754,790

Gen X705,570

Baby Boomers678,580

Silent Gen197,170

Greatest Gen

22,490

Centennials775,230

Source: Colorado Division of Local Government, State Demography Office.


Can Consumers Continue the Pace?

• Additional 50,900 jobs per year (2014-2016)• Avg Annual Wage +2.1% per year (2014-2016)• DOW +13.4%; S&P 500 +9.5%• Total HH Debt: $12.3 Trillion (Q2 2016), +3.7%

• Savings rate 5.8%, up from 20-year avg of 5%

Trillions Q2 2016 Q2 2015 % ChangeMortgage $8.4 $8.1 3.0%Home Equity $0.5 $0.5 -4.2%Student Loans $1.3 $1.2 5.8%Auto Loans $1.1 $1.0 9.7%Credit Cards $0.7 $0.7 3.7%Other $0.4 $0.3 4.9%TOTAL $12.3 $11.9 3.7%


Millennials not yet at income potential

$400

$500

$600

$700

$800

$900

$1,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Median Weekly Earnings by Age Group

25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over

Source: U.S. Bureau of Labor Statistics, Current Population Survey.


Spending patterns differ by generational group (Top 3 categories = 70% Millennials; 62% Gen X & Boomers)

$0 $5,000 $10,000 $15,000 $20,000 $25,000

All Other

Education & reading

Apparel & services

Entertainment

Healthcare

Personal insurance & pensions

Food

Transportation

Housing

55 years+($49,260)

35-54 yrs($64,140)

< 35 yrs($44,510)

Source: U.S. Bureau of Labor Statistics, 2014 Consumer Expenditure Survey.

Consumer Spending by Category by Age

Age Group (Avg Ann Spending)


Metro Denver Real Retail Trade Sales Growth Rates

4.0% 4.3%

-4.7%

-10.6%

3.3% 3.1%

5.4%

2.4%

5.2%4.4%

2.2% 2.4%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Source: Colorado Department of Revenue.2016e = DRP estimate; 2017f = DRP forecast


Residential Real Estate

My lips are chapped from the winds of change.– Sarah Vowell

© Can Stock Photo Inc. / ksenchik30


Metro Denver ranked #16 and Boulder #7 for highest median home price in 3Q 2016

$222 $218$197

$172 $173 $166 $177$197 $209 $224 $234 $247

$250 $245$219 $220 $232 $231

$252$281

$310$354

$383$404

$366 $376 $360 $346 $358 $353$384 $372

$391

$454

$515$546

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Median Home Prices (in thousands)

United States Metro Denver Boulder

Source: National Association of REALTORS.2016e = DRP estimate; 2017f = DRP forecast


Denver has 2nd highest median home price and fastest price increase of competitors

$0

$100

$200

$300

$400

2007 2008 2009 2010 2011 2012 2013 2014 2015 3Q2016

Austin

Dallas

Denver

Salt Lake City

Portland

Atlanta

U.S.Phoenix

Source: National Association of REALTORS.

Median Home Price (in 000s)

Seattle


Home sales begin to slip, though remain at a reasonable level

50,244 49,789 47,837

42,070

38,818 38,106

45,210

53,676 54,07356,062 55,634

53,965

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017f

Metro Denver Existing Home Sales Closed

Sources: Metrolist (2005-2010); Denver Metro Association of REALTORS (2011-2016).2017f = DRP forecast


Apartment Vacancy and Rental Rates

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

3%

5%

7%

9%

11%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e

Monthly Rental Rate

Vaca

ncy

Rate

Metro Denver Vacancy Rate Metro Denver Rental Rate

Source: Denver Metro Apartment Vacancy & Rent Survey.2016e = DRP estimate


Multi‐family represents 52% of new construction in 2016 (30+ year average = 28%)

0

5,000

10,000

15,000

20,000

25,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Metro Denver Building Permits*Multi-Family (5+ units)Single-Family Attached (2-4 units)Single-Family Detached (1 unit)

* The Census Bureau tracks building permits by the number of housing units in the structure.Source: U.S. Census Bureau, Building Permits.

2016e = DRP estimate; 2017f = DRP forecast


Employment

The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.- William Arthur Ward

© Can Stock Photo Inc. / herreid


Colorado 5th fastest growing state in 2015; #9 through 3Q 2016

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

AZ CO KS NE NM OK TX UT WY

Nonfarm Job Growth Rates

2014 2015 2016

#6#5#1

#9#7 #5#14

#25

#4

#49

Source: U.S. Bureau of Labor Statistics, Current Employment Statistics.

#3


Employment growth varies across the state

0.6%

1.1%

2.2%

2.4%

3.1%

3.5%

2.8%

1.8%

0.0% 1.0% 2.0% 3.0% 4.0%

Grand Junction

Greeley

Pueblo

Colorado Springs

Metro Denver

Fort Collins

Colorado

U.S.

Nonfarm Job Growth Rates by Metro Area, through 3Q 2016

Source: U.S. Bureau of Labor Statistics, Current Employment Statistics.


Nonfarm Job Growth Rates

1.6% 1.9% 2.1%1.7% 1.6%

3.6% 3.7% 3.5%2.9%

2.4%

-6%

-4%

-2%

0%

2%

4%

6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

United States Metro Denver

Metro Denver 2016 Employment = 1.6 million2013-2015: 53K jobs added per year; 2016: 45K; 2017: 39K

Source: U.S. Bureau of Labor Statistics.2016e = DRP estimate; 2017f = DRP forecast


Proprietors Are Another Significant Component Of Employment

Source: U.S. Bureau of Economic Analysis.

Proprietors Employment25% of Colorado’s Total Employment (US avg = 22%)

708,914

769,237 776,680797,054 796,997

820,310 825,917849,189

869,464 893,366

500,000

600,000

700,000

800,000

900,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


Key Metro Denver and Northern Colorado Industry Clusters

• Aerospace• Aviation• Beverage Production• Bioscience

• Medical Devices & Diagnostics

• Pharmaceuticals & Biotechnology

• Broadcasting & Telecommunications

• Energy• Fossil Energy• Cleantech

• Financial Services• Banking & Finance• Investments• Insurance

• Healthcare & Wellness• IT/Software


Metro Denver and Northern Colorado Industry Clusters, 2015‐2016

Source: Development Research Partners.


Commercial Real Estate

May you have a strong foundation when the winds of change shift… - Bob Dylan, “Forever Young”

© Can Stock Photo Inc. / josephpucadyilphoto


Metro Denver Commercial Real Estate

Vacancy Rate (direct) Lease Rate4Q 2016 4Q 2015 4Q 2016 4Q 2015

Office 9.3% 9.6% $25.36 $24.65

Industrial 3.8% 3.1% $7.41 $7.03

Retail 4.5% 5.0% $16.55 $16.00

Source: CoStar Group, Inc.

Construction Activity (YTD through 4Q 2016)• Office: 1.4 MSF completed; 5.9 MSF under construction• Industrial: 4.5 MSF completed: 2.3 MSF under construction• Retail: 1.3 MSF completed; 1.2 MSF under construction


New Commercial Real Estate Added in Metro Denver

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mill

ions

of S

quar

e Fe

et

Office Industrial Retail

Source: CoStar Realty Information


New Commercial Real Estate by Area

Source: Denver Business Journal, “Denver Crane Watch,” 12/29/2016.


Winds that are blowing….

Challenges• Global economic

uncertainty• Rising interest rates• Rising inflation rate• Seeking clarity on

taxes, healthcare• Infrastructure needs

> funding options• Affordable housing

Opportunities• More confident

consumer• Changes in who is

buying what & where• Strong job growth

continues• Active commercial

real estate market• Technology driving

major changes


Questions?

Development Research Partners10184 West Belleview Avenue, Suite 100

Littleton, Colorado 80127(303) 991-0070

www.DevelopmentResearch.net

Patricia Silverstein, [email protected]

drp 2017 forecast 01 - development research projects/economic and... · scorpions, “wind of...

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